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Stocks 303: Understanding the Statement of Cash Flow

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1.
In which part of the statement of cash flow would you find debt issues recorded?
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Cash flows from financing activities. Debts are listed in this section.
2.
The statement of cash flow records inflows and outflows of cash as soon as income is earned or expenses incurred.
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False. It records income and expenses regardless of when they were earned or incurred.
3.
Financing activities include stock and bond investments.
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True. The financing section of the statement of cash flow records a companys investments.
4.
Why is depreciation added to net income when calculating a firms cash flow from operating activities?
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Cash is not paid out for it. Because the statement of cash flow records inflows and outflows of cash, depreciation must be added to net income, since it cannot be subtracted from it.
5.
Why is the statement of cash flow important to investors?
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It helps investors determine the financial well-being of companies. The statement of cash flow does not make recommendations, nor can it provide actual data on the future.
6.
On a companys statement of cash flow, the sale of property is recorded as a ______.
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Cash inflow. It generates incoming cash.